Great Portland's £125m cash call as developer seeks to expand

Toby Courtauld has launched a rights issue to raise money for the Portland Group

Great Portland Estates, the London office developer, will this week launch a surprise rights issue to raise about £125million.

Chief executive Toby Courtauld is keen to build a war chest for acquisitions as opportunities begin to emerge in its core London market.

GPE has one of the most conservative balance sheets in the sector. It is not under pressure to raise funds and has debts of only £375million, none of which are repayable until 2012.

But while Courtauld is keen to acquire well-located investment
property, let to strong occupiers on long leases, he is likely to
remain downbeat about prospects for the commercial property sector in
general.

The company is expected to announce its fund raising on Tuesday,
alongside results that will also show that GPE's loan-to-value ratio is
less than 40 per cent, lower than most rival firms that have already
completed rights issues.

While the company is expected to reveal a 43 per cent decline in the
value of its property assets in the year to March 2009, analysts are
forecasting underlying profits of about £21.5million compared with
£23.8million a year ago.

GPE, which specialises in buying buildings, refurbishing them and
then letting them at higher rents, has halted its development
programme. It has no plans to restart any building work in the short
term.

Its decision to halt developments has led to an increase in the
number of empty properties, as leases expire at buildings due for a
makeover.

Despite this, Courtauld insisted in January that the company could
weather the recession because its West End properties are let at
'defensively low' average office rents of £40.10 per square foot.

In a fillip to the company, GPE let 60,887 square feet of West End
office space to High Street clothing retailer New Look in February. But
the deal included a 15-month rent-free period and GPE is paying the
retailer £2.5million as a cash incentive over the first six months of
the lease.

New Look signed a 15-year lease on the space, located in GPE's Wells
& More development in the West End. It will pay £2.58million a year
in rent.